Unconscionable Rent

By popular demand - for readers who have written in requesting the pedestrian lawyer to tackle landlord tenant issue.

What would happen if Nigerians, like citizens in other parts of Africa and the world, did not have to pay rent years in advance or had rent control laws which were actually enforced? Think about it.

It would free up more money to invest (and make more money). It would eliminate the tension that builds up when the expiry date on your lease looms. It would reduce the temptation to be ‘corrupt’. It would make us less dependent on our wealthier relatives and reduce our obligations to those who depend on us. We could spend more on health, recreation and maybe even invest in a worthy cause; the possibilities are endless.

However what most of us do today is save everything we have, to ensure the landlord gets his rent one, two, three years in advance; regardless of the fact that we earn daily, weekly, definitely not more than, monthly.

It was not always this way. We used to be like other civilised society where all that was required was a month’s deposit as security and your rent cheque at the end of the month. Some have blamed the civil war, the oil boom, and the sudden ‘retrenchment’ of civil servants who had no place to go as the cause for this practice but more important is…when will the practice end and what can we do?

At the second meeting of the Body of Attorney Generals in Makurdi on May 15, 2008, the Minster of Justice and Attorney General of the Federation, Aondoakaa, challenged to the Body of Attorney Generals of Nigeria to initiate laws in their respective states to criminalize the payment of advance rent required by landlords. According to him ‘the demand of over one year advance rent from tenants by Nigerian landlords is one of the root causes of corruption in the country’. The jury is still out on this one and it is not hard to see the division lines. The landlords are in an uproar over such a statement while the tenants are happy for obvious reasons.

So what is the position? How has a practice which is largely unfair become widely accepted?

The truth: by acquiescence of everyone involved in a landlord tenant agreement. The relationship between a landlord and a tenant is contractual which means both parties ‘agree’ to the terms and conditions which will bind and regulate their relationship…once you agree then you can no longer be heard to complain. That generally speaking is the position of the law.

Inequitable, it would seem, especially when there is a monopoly amongst landlords; demand far outweighs supply and alternatives are non existent. In a sense, tenants in Nigeria have little choice, they have to agree. It is the frustration with this situation which probably led the Attorney General to conclude that this demand on limited resources contributes to the endemic corruption and looting of public assets which we are currently suffering from.

Unfortunately, merely criminalising the payment of advance rent might not change the practice overnight because the issues of ‘enforcement’ and sufficient alternatives for would be tenants has not been resolved.

While we wait patiently for the criminalisation of advance rent payment, something which the courts and tenants should be considering is challenging such contract obligations on the grounds of being unconscionable.

The unconscionability defence would allow a tenant to challenge the contract for being unfair and unenforceable. One thing which works to the tenant’s disadvantage here is that the rent would have already been paid...but the argument of the tenant could be that he wants his ‘advance’ money back and is willing and able to pay every month.

The key elements of success in using this defence are two fold. The first is that one party to the contract (the landlord) took advantage of superior bargaining power to insert provisions that make the agreement overwhelmingly favor the interests of that party (check). And two, the tenant being able to prove both that there was a problem with the substance of the contract (e.g., the tenant has had to undergo serious hardship to meet this condition) and the process through which that contract was formed (e.g., tenant in weak bargaining position because all landlords have the same requirement).Check

A look at the leading cases on unconscionability across the world reveals a trend which favours parties which are weak and disadvantaged. For example in the United States the court overturned a contract where multiple items were sold to a single mother on a pro rata credit basis (Williams v. Walker-Thomas Furniture Co., (1965)) and in Australia, the couple who had a contract overturned in their favour, could not speak English and as such were at a disadvantage.

The Nigerian tenant today is clearly at a disadvantage however they have responsibilities too. They have to be ready to go to court on principle to resist such contracts and need to make sure they keep to their contract obligations – pay the rent as soon as it is due.

Fighting lease contracts on the basis on unconscionably could work…the only fear is if the judges, as landlords, decide after all, that the payment of rent years in advance, is fair.

Published September 30 2008